That's an interesting use of circular references. Normally, spreadsheets insist that the dependencies between cells form a DAG (Directed Acyclic Graph), where "acyclic" is another way to say "no circular references".
But I can see that it would be useful for iterative techniques. You have an "input" cell that contains a guess at some value you want to find. The spreadsheet grinds away to produce, in an "output" cell, a hopefully better guess. So far, no cycles.
You introduce a cycle by, in effect, copying the output back to the input. You could do that by making the output and input the same cell, but for the sake of discussion let's suppose they're different cells.
I've seen other spreadsheets (all obsolete, unfortunately) that would iterate for you, but they did it as a special operation, not in response to circular references. Hewlett Packard pocket calculators had it built in, as a SOLVE function; you programmed a function and gave an initial guess or two, and it would try to home in on a zero of the function.
In Numbers, perhaps you could make the iteration manual. Write an AppleScript to copy the value from the output cell back to the input cell. Choose standard names for the cells so that you'd only need to write one AppleScript for any number of spreadsheets. Then repeatedly run the AppleScript (probably from the Script menu) to watch it converge.
Just a thought...
